The over Rs 10,000-crore auction for foreign institutional investors (FIIs) debt limits today attracted healthy demand on the back of improved investor sentiment following certain relaxations by the Securities and Exchange Board of India (Sebi).

The ‘government old’ category, which has no investment restrictions, saw demand worth Rs 2,842 crore against Rs 1,094 crore on offer and the cut-off bid came in at 10.50 basis points (bps) versus 5.30 bps seen last month. Even corporate bonds with no restrictions saw good demand and high cut-offs.

GOOD SHOW

Category

Government
old

Government new
long term

Corporate
old

Amount available
for auction (Rs cr)

1,094

4,451

5,071

Highest bid (bps)

12.00

0.20

8.65

Cut-off (bps)

10.50

0.08

6.45

Previous cut-off (bps)

5.30

Full allocation

5.80

Total demand (Rs cr)

2,842

5,296

6,931

Source: Dealers

Market experts said FIIs bid aggressively with the view that Reserve Bank of India may announce a bond buy back programme and soon start relaxing interest rates. Also, easing of debt allocation criteria by allowing FIIs to carry forward half of their debt holdings to the next calendar year by Sebi in October helped improve FII sentiment.

The strong demand from FIIs at today’s action comes in the wake of reports the government is considering raising the FII investing ceiling in government and corporate bonds further by $5 billion each.

Currently, the total investment limit for FIIs in the domestic debt market is about $66 billion, distributed through a number of categories across government, corporate and infrastructure debt, some of which impose tenor or lock-in restrictions.

FII investment limits in the debt market were revised in November 2011 and June this year to help bring down the current account deficit. The current limit for FII investment in gilts is $20 billion (of which $10 billion has residual maturity of three years). For corporate bonds, it is $45 (of which $25 billion is in long-term infrastructure bonds).

Foreign investors are mostly attracted to categories with no investment restrictions, such as government old and corporate old. Categories, including infrastructure corporate bonds, which have lock-in restriction, have proved to be unpopular among investors.

Sebi's Rs 10k FII debt auction gets good response

The over Rs 10,000-crore auction for foreign institutional investors (FIIs) debt limits today attracted healthy demand on the back of improved investor sentiment following certain relaxations by the Securities and Exchange Board of India (Sebi).

The over Rs 10,000-crore auction for foreign institutional investors (FIIs) debt limits today attracted healthy demand on the back of improved investor sentiment following certain relaxations by the Securities and Exchange Board of India (Sebi).

The ‘government old’ category, which has no investment restrictions, saw demand worth Rs 2,842 crore against Rs 1,094 crore on offer and the cut-off bid came in at 10.50 basis points (bps) versus 5.30 bps seen last month. Even corporate bonds with no restrictions saw good demand and high cut-offs.

GOOD SHOW

Category

Government
old

Government new
long term

Corporate
old

Amount available
for auction (Rs cr)

1,094

4,451

5,071

Highest bid (bps)

12.00

0.20

8.65

Cut-off (bps)

10.50

0.08

6.45

Previous cut-off (bps)

5.30

Full allocation

5.80

Total demand (Rs cr)

2,842

5,296

6,931

Source: Dealers

Market experts said FIIs bid aggressively with the view that Reserve Bank of India may announce a bond buy back programme and soon start relaxing interest rates. Also, easing of debt allocation criteria by allowing FIIs to carry forward half of their debt holdings to the next calendar year by Sebi in October helped improve FII sentiment.

The strong demand from FIIs at today’s action comes in the wake of reports the government is considering raising the FII investing ceiling in government and corporate bonds further by $5 billion each.

Currently, the total investment limit for FIIs in the domestic debt market is about $66 billion, distributed through a number of categories across government, corporate and infrastructure debt, some of which impose tenor or lock-in restrictions.

FII investment limits in the debt market were revised in November 2011 and June this year to help bring down the current account deficit. The current limit for FII investment in gilts is $20 billion (of which $10 billion has residual maturity of three years). For corporate bonds, it is $45 (of which $25 billion is in long-term infrastructure bonds).

Foreign investors are mostly attracted to categories with no investment restrictions, such as government old and corporate old. Categories, including infrastructure corporate bonds, which have lock-in restriction, have proved to be unpopular among investors.